Wednesday, January 13, 2010



I am not a fan of the HMRC Charter – or whoever’s Charter it is. In the interests presumably of clarity, the HMRC press release describes it as HMRC’s new Charter but an HMRC notice of the same day calls it HMRC’s new Customer Charter and HMRC actually head it “Your Charter”.

However there are some interesting bits in it that seem to revolutionise the way HMRC work. For example paragraph 2 says, “We will provide information that helps you understand what you have to do and when you have to do it”. Presumably this means that the ordinary citizen will no longer be expected to know and understand the complicated mass of tax law that we have. Instead he can wait for HMRC to tell him what he has to do. Presumably it also means that when someone calls an HMRC Helpline and the person on the other end of the telephone is not able to help with the particular issue raised they will be transferred to someone who will be able to help. Sadly, I fear not. I suspect it means no more than we will continue to publish masses of information on our website; you probably won’t be able to find what you need because our search engine is not very good (but why not search our site using Google instead); and if you call us we will simply tell you that we have published something and you should look harder.

Paragraph 5 says, “We will make sure that you are dealt with by people who have the right level of expertise”. That will be a welcome change in most cases! At least it will be if HMRC mean what they say. I expect they really mean that they will continue to decide what is the right level of expertise and it’s bad luck for the taxpayer if they get it wrong. To be fair I don’t expect them to have many, if any, staff with the necessary level of expertise to deal with all of the problems of a growing business across the wide range of taxes that exist. But then they shouldn’t undertake what they cannot deliver.

Paragraph 7 is interesting. “We will give you information we hold about you when you ask for it, as long as the law lets us”. I am not aware of any law that forbids HMRC to tell me information that relates to me. I wonder what law they have in mind. All that I can think of is that they may have a duty of confidentiality where information is provided by a third party. But if so, what are they actually promising to tell me? Things that I have already told them? That would be a pointless undertaking. Presumably they are undertaking to tell me things that they have worked out (or guessed) for themselves. There cannot be any confidentiality there. Well at least that will be a big advance over what they have done in the past. They always seem to have worked on the basis of, “We are not going to tell you what we have got (or think we have got) because there might be other things that we don’t know about that you might reveal to us if we simply ask you to review your returns”. I can see the reasoning behind that approach and am a bit surprised if HMRC really intend to abandon it, but I can’t think of anything else that they might mean by the undertaking. I certainly think it will make negotiations with HMRC much easier, and quicker, if they are going to put all of their cards face up on the table (that is what the courts expect taxpayers to do) at the start of an enquiry.

Monday, January 11, 2010



“What you can expect from us … Help and support to get things right”
(extract from HMRC Charter, November 2009).

“We accept that HMRC maintain the proposition that callers to the VAT Helpline must ask the right questions to obtain the correct answers. We also accept that people staffing the Helplines are generally furnished with text answers to common questions and that it is too much to expect the people staffing the Helplines to give constructive and intelligent and helpful advice”
(extract from First-tier tribunal decision in James Jeffrey (Decision TC 71)).

Are these two HMRC positions compatible? If HMRC helpline staff cannot be expected to give “constructive, intelligent and helpful advice” – or indeed any useful advice at all unless the taxpayer is sufficiently tax-literate to be able to identify and ask “the right questions to obtain the correct answers” – what does HMRC understand by helping and supporting to get things right? If someone knows what question to ask, it is generally relatively easy to find the right answer. Where people need help is where they can explain a problem but do not know what precise question will lead towards an answer to that problem.

Of course there is a limit to the level of knowledge that HMRC helpline staff ought to have. But surely they ought to know enough about tax to be able to identify what is worrying a caller and then to either choose the “right question” from their list of FAQs or get someone who is capable of doing so to call back the taxpayer. For HMRC to maintain that all that can be expected of their staff is to look up the answer if the question that a caller poses happens to be one of their FAQs seems outrageous to me.

That HMRC chose to pursue Mr Jeffrey before the Tribunal seems to me equally outrageous on the basis of the facts set out by the Tribunal in its decision.

Mr Jeffrey had been delinquent in the past in paying the VAT on time. He therefore was not dependent on the VAT Helpline. He had the telephone number of someone in HMRC’s Debt management Unit. He knew that he had to submit his VAT return and pay his VAT by 30 June 2008. However he had not received the VAT return. On 23 June he called his contact in Debt Management who promised to send him a duplicate form. By 30 June he had still not received the form and telephoned his contact again. She told him to try and do his VAT return online in order to avoid a surcharge.

This was unhelpful advice because, as the Tribunal explained, Mr Jeffrey “did not have, or seemingly know how to operate, a computer, and also because we understand various codes required to facilitate online filing would be unlikely to have been obtained in time to file online”. Unlikely is a bit of a euphemism here. One of the codes is sent by post, so if it had been applied for online on 30 June 2008 it would have been impossible to have obtained the code the same day.

A friend told Mr Jeffrey that if he drove over to a particular VAT office he would be able to obtain a return from there, which he duly did. He completed and posted the return and his cheque. HMRC recorded having received the cheque on 9 July, so demanded a surcharge for late payment. A surcharge is not payable if the taxpayer has a reasonable excuse for the late payment. Accordingly HMRC presumably felt that not having received a VAT return, even after asking for one and then asking HMRC what to do, not once but twice, and then being given impractical advice, did not amount to a reasonable excuse.

Unsurprisingly the Tribunal disagreed. It pointed out that the surcharge arises only if the taxpayer had outstanding VAT at 30 June 2008. It thought the Debt Management Unit ought to have told Mr Jeffrey that if he paid the VAT due electronically either by BACS (by transfer initiated before 2 July) or by CHAPS (by transfer initiated by noon on 7 July) he would avoid the surcharge even if he filed the actual return late. The Tribunal therefore felt that “had he been given the right advice and instruction by someone who must have been versed in all of the intricacies as to how he could avoid a default and a surcharge, he would indeed have paid on time”.

Surely most people in the light of these facts would have thought that Mr Jeffrey had a reasonable excuse; he had done his best to comply with his obligations in time and the only reason he had not achieved this is that HMRC were not prepared to tell him that he was concentrating on the wrong obligation and had time to pay the tax, the real obligation, by the due date and avoid a penalty.

In the context that he was entitled to expect “help and support to get things right” it is worrying that not only did no one in HMRC (including in their Solicitor’s Office which argued the case before the Tribunal) identify that in the circumstances Mr Jeffrey had a reasonable excuse, but HMRC were prepared to spend taxpayers’ money in insisting on a hearing before the Tribunal that could clearly be expected to expose their own shortcomings.

It is certainly hard to see how HMRC can have expected their reputation for fairness and reasonableness to survive such a case. Perhaps no one within HMRC cares about that?